Spin-Off of Embecta Corp.

12 Months Ended

Sep. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

On April 1, 2022, the Company completed the spin-off of its Diabetes Care business as a separate publicly traded company named Embecta Corp. (“Embecta”) through a distribution of Embecta’s publicly traded common stock (listed on NASDAQ under the ticker symbol “EMBC”) to BD’s shareholders of record as of the close of business on March 22, 2022 (the “record date”). The Company distributed one share of Embecta common stock for every five common shares of BD outstanding as of the record date and shareholders received cash in lieu of fractional shares of Embecta common stock. BD retained no ownership interest in Embecta subsequent to the spin-off. The distribution is expected to qualify and has been treated as tax-free to the Company and its shareholders for U.S. federal income tax purposes.

Embecta’s distributions on March 31, 2022 to the Company in connection with the spin-off included the issuance of $200 million of senior unsecured notes to the Company and a cash distribution of approximately $1.266 billion. Additional disclosures regarding the various financing transactions entered into by Embecta and related to the spin-off are provided in Note 16.

The Company and Embecta entered into various agreements to effect the spin-off and provide a framework for the relationship between the Company and Embecta after the spin-off. Such agreements include the separation and distribution agreement, as well as the following ongoing agreements: a cannula supply agreement, an intellectual property matters agreement, a transition services agreement, manufacturing and supply agreements, a lease agreement, a distribution agreement to support commercial operations, a logistics services agreement and other agreements including an employee matters agreement and a tax matters agreement. Under these agreements, the Company will continue to provide certain products and services to Embecta following the spin-off. The agreements do not provide the Company with the ability to influence the operating or financial policies of Embecta subsequent to the spin-off date. Amounts included in the Company’s consolidated statements of income during the fiscal year ended September 30, 2022 as a result of these agreements were immaterial.

The historical results of the Diabetes Care business (previously included in BD’s Medical segment) that was contributed to Embecta in the spin-off, as well as interest expense related to indebtedness incurred by Embecta prior to the spin-off date, have been reflected as discontinued operations in the Company’s consolidated financial statements for all periods prior to the spin-off date of April 1, 2022.

Details of Income from Discontinued Operations, Net of Tax are as follows:


Millions of dollars	2022		2021		2020
Revenues	$	538	$	1,117	$	1,043
Cost of products sold	143		320		264
Selling and administrative expense	78		148		141
Research and development expense	32		59		57
Acquisition-related integration and restructuring expense	—		6		10
Other operating expense, net	95		35		—
Total Operating Costs and Expenses	348		569		472
Operating Income	190		549		571
Interest expense	(4)		—		—

Other income, net	—		2		—
Income from Discontinued Operations Before Income Taxes	186		550		571
Income tax provision	42		62		50
Income from Discontinued Operations, Net of Tax	$	144	$	488	$	522

During the year ended September 30, 2022, the Company incurred $30 million of expense which included costs to execute the spin-off and other costs for related residual activities. These costs are recorded within Income from Discontinued Operations, Net of Tax for the year ended September 30, 2022. Separation costs incurred by the Company prior to the spin-off date, including those for consulting, legal, tax and other advisory services associated with the spin-off, were previously recorded within Other operating (expense) income, net and are now included as a component of Income from Discontinued Operations, Net of Tax.

The Company’s Revenues and Cost of products sold from continuing operations were recast to reflect previously eliminated intercompany transactions that occurred between BD and Embecta and that resulted in a third party sale in the same period. The impacts of these transactions to Embecta are also reflected as a component of Income from Discontinued Operations, Net of Tax.

The following amounts associated with the Diabetes Care business are classified as assets and liabilities of discontinued operations in the Company’s consolidated balance sheet at September 30, 2021:


Millions of dollars	2021
Assets
Trade receivables, net	$	147
Inventories	123
Prepaid expenses and other	23
Current Assets of Discontinued Operations	293
Property, Plant and Equipment, Net	390
Goodwill and Other Intangibles, Net	27
Other Assets	6
Noncurrent Assets of Discontinued Operations	$	423
Liabilities
Accounts payable	$	54
Accrued expenses	75
Salaries, wages and related items	28
Current Liabilities of Discontinued Operations	157
Deferred Income Taxes and Other Liabilities	16
Noncurrent Liabilities of Discontinued Operations	$	17

The Company recorded its distribution of net liabilities to Embecta as an increase in Retained earnings. The amount recorded reflected the carrying amounts, as of April 1, 2022, of the net liabilities distributed and included $1.650 billion of debt issued by Embecta, as further discussed above and in Note 16, as well as $265 million of cash. The Company also recorded a net decrease to Accumulated other comprehensive loss of $251 million to derecognize foreign currency translation losses which were attributable to Embecta.